Real term pay falling for six months in a row

British workers have now been squeezed by six months in a row of falling real terms wages, official figures show.

Average weekly earnings excluding bonuses rose by 2.1% in the three months to August, according to the Office for National Statistics (ONS) – well below the rise in the cost of living.

It meant that real pay – which takes account of the effect of inflation on spending power – was 0.4% lower over the period, extending a decline in this measure to six months.

On a brighter note, unemployment continued to fall over the latest three-month period, dropping by 52,000 to 1.44 million.

Meanwhile the unemployment rate remained unchanged at 4.3%, its lowest level since 1975.

There were 32.1 million people in work, a rise of 94,000 over the period – and the ONS said employment growth was driven mainly by women.

But the wage data highlighted the continued squeeze on household incomes, a day after the ONS reported that inflation last month rose to 3%, its highest level in more than five years.

Living standards are still struggling to recover from the aftermath of the financial crisis, which saw real terms pay decline for an extended period from 2009 to 2014..

The latest pay figure – which was slightly higher than expected though lower than in the three months to July – looked unlikely to derail expectations that the Bank of England will hike interest rates next month.

Image:The unemployment rate remains at the lowest level since 1975

But the pound, trading at just under $1.32 against the US dollar, slipped back a little, as some economists said there would need to be stronger signs of wage growth if the Bank wants to go for another increase in the new year.